Observations focused on the problems of an underdeveloped country, Venezuela, with some serendipity about the world (orchids, techs, science, investments, politics) at large. A famous Venezuelan, Juan Pablo Perez Alfonzo, referred to oil as the devil's excrement. For countries, easy wealth appears indeed to be the sure path to failure. Venezuela might be a clear example of that.

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Santero Economics Will Not End In Venezuela With The Upcoming Elections

July 5, 2015

The Venezuelan Economy has been run in the last few years with a limited, random and incoherent set of principles, that reminds me a lot of Santería, which is composed of a set of beliefs taken from various religions, which are some times incoherent and even contradictory and which are based on hope, spiritual beliefs and ideas with little fundamentals. Thus, we can characterize the current policies as Santero Economics, as the policies are equally incoherent, based on hope and many times go against each other, with no relation to known economic principles and fundamentals.

By the end of last year, the typical narrative (including mine) was that in January Santero Economics would be set aside, as inflation and scarcity would force Maduro to do so, but as we know, nothing happened. By February, I was convinced nothing would change this year.

The current narrative in most analysis abut Venezuela is very similar: Maduro is afraid that adjusting the exchange rate, increasing prices and the like would create a backlash and he is simply waiting for the upcoming Parliamentary elections before making any changes in his Government’s policies.

Well, I now believe that this is simply wrong, as Santero Economics is here to stay, as long as Nicolas Maduro is President of Venezuela, as he has been convinced by by both local and foreign advisers that the problems of the Venezuelan economy are caused by the oligarchy and the opposition and economic indicators such as inflation have little to do with the Government’s policies.

The ideas of these pseudo-gurus, who are close to Maduro, have now taken over, overcoming the opinions of those in charge of the economy, whose proposals get rejected time and time again.

At the core of Santero Economics beliefs is that deficit spending, salary increases and increases in the monetary supply have little to do with inflation, which is a political phenomenon. Thus, at the core of the problem is the economic war being waged by the oligarchs. The solution is simply to import more stuff, control more of the economy and try to bypass the current private sector. It makes no sense to change the Bs. 6.3 per US$ exchange rate, because all of those imported products would have increased prices.

According to the Santero Economics Mythology, it makes no sense to continue giving foreign currency to a private sector that has half a trillion (??) dollars abroad . If they want to produce, let them bring the dollars back and invest them in Venezuela.

Similarly, the Santero lore states that the bachaqueo of Venezuelan products into neighboring countries is an essential part of the Economic War, set up by the oligarchy, which uses the proceeds from this activity (As if the Venezuelan military did not exist) to bring back the money and continue its attack against the Venezuelan currency. Thus, the only rationale for increasing the price of gasoline, for example, is to remove a weapon from the arsenal of the enemy in the economic war. substituting that subsidy by a direct subsidy to the people.

The final part of the plan is to use the communal power to supervise, oversee and denounce unfair prices as a way of controlling inflation.

Everything else is apparently perfect in the world of Santero Economics. There is no answer to the question as to why if deficit spending does not matter why not n-tuple spending without limit. And if the monetary supply is irrelevant, why not increase the money supply without limit and make everyone really wealthy.

Maybe they could visit Greece and solve their problems too.

Meanwhile, Maduro is happy, everything is going well and he can devote his time to other things:

I still refuse to believe that the upper spheres of government are so dumb and ignorant as to themselves believe in the economic war diatribe. To me it’s all cynicism, there values and morale are so screwed up they simply don’t care about keeping up with the facade of economic warfare. It’s all in the end about staying in control.

Yesterday agents of SUNDDE (price control office) visited various butchers in Porlamar and forced them to sell their inventories of beef & chicken at regulated prices.
1st quality beef at Bs.250 kg and chicken at Bs.65.

The prices in the store were Bs.960 for 1st quality beef & Bs.300 for whole chickens which are the prices that you will find these products in every outlet including major supermarkets in Margarita.

The owner of one butcher shop explained that the wholesalers are selling them a side of beef at Bs.490 kg and that after preparing & cleaning they sell the top quality parts at Bs.960 which gives them a 20% profit when the law allows for a 30% profit. (Yes, profit margins in all sectors are also controlled).

The big question here is why attack the small individual owners? Why not go after the wholesalers?

This is not about an economic war.
This is pure political populism in it’s most ignorant & abusive form..

The prices in the store were Bs.960 for 1st quality beef & Bs.300 for whole chickens which are the prices that you will find these products in every outlet including major supermarkets in Margarita,.

I will look at chicken, which I suspect is more likely to be imported, as it is cheaper. Chicken in my area goes for about a dollar a pound, which is roughly $2/kilo. This would suggest that the market exchange rate for the Bolivar would be roughly Bs,B. 150 per US dollar.

Miguel, with all due respect, a common error among the opposition is expecting rational behavior, ever. I’m not even convinced that an existential threat would provoke a rational response. These are not rational people – period.